Brazil Sets Green Transition Rules on SAF, Carbon Capture and Green Hydrogen

The Brazilian federal government signed Decrees 13.094, 13.095, and 13.096, shifting its green transition agenda from statutory framework to market execution. The executive decrees regulate earlier legislation passed in late 2024, detailing operational rules for sustainable aviation fuel (SAF), geological carbon storage (CCS), and low-carbon hydrogen. While the new rules provide legal definitions for project developers, they also highlight friction between mandated emission targets, buyer cost burdens, and agency capacity.

SAF mandates face a nine-business-day compliance window

Decree 13.094/2026 establishes operational guidelines for the National Sustainable Aviation Fuel Program (ProBioQAV), enforcing a 1% greenhouse gas emission reduction on domestic flights starting January 1, 2027. The requirement scales up to 10% by 2037. To handle logistics across Brazil's territory, the decree establishes Sustainable Aviation Fuel Certificates (CS-SAF). This book-and-claim system lets airlines purchase environmental credits from producers in other regions, fulfilling compliance without physically moving fuel to remote airports. Official estimates project that SAF development could add R$ 13 billion to gross domestic product and create 9,000 direct jobs by 2029.

Implementing the mandate presents severe cost challenges for commercial carriers. Jet fuel accounts for roughly 40% of operating expenses for Brazilian airlines, while SAF commands prices two to five times higher than conventional fossil jet fuel. Federal incentives under the decree remain limited to industrial production financing through BNDES credit lines and tax-incentivized debentures. The government omitted tax exemptions on fuel consumption, leaving airlines to absorb the price spread. Carrier balance sheets, still recovering from debt restructurings, lack the capacity to take on these higher expenses without raising ticket prices.

In addition, the regulation prohibits corporate cargo clients from applying CS-SAF certificates toward their Scope 3 emission inventories. This restriction prevents airlines from setting up co-financing agreements with corporate shippers. Timeline constraints worsen the pressure. The decree gives the National Petroleum Agency (ANP) and the National Civil Aviation Agency (ANAC) until December 18, 2026 to finalize sub-regulatory details. That leaves airlines just nine business days, from December 18 to 31 (discounting the Christmas holiday), to adjust purchasing contracts before enforcement begins on January 1.

Domestic physical supply remains scarce in the short term. While large private facilities like Acelen's $3 billion export project in Bahia target international markets, and state-backed projects like Petrobras's $1.2 billion Cubatão biorefinery target commercial operation around 2030, local output relies mostly on refinery co-processing. As detailed in our previous analysis of airline balance sheet pressures under the law, airlines will likely depend on imported SAF to meet initial targets, driving up operational costs.

Framework established for geological carbon storage

Decree 13.095/2026 provides the regulatory framework for Carbon Capture and Geological Storage (CCS), covering direct industrial emissions, biofuel facilities, hydrogen units, and Direct Air Capture (DAC). The decree appoints ANP as the main regulatory body overseeing subterranean site evaluation, exploration permits, and facility closures. Following the end of carbon injection, operators must run continuous site integrity monitoring for at least 20 years to guarantee permanent containment.

To coordinate infrastructure, the Ministry of Mines and Energy (MME) must publish a National CCS Plan every two years. This plan will map industrial emission clusters, plan pipeline corridors, and identify priority geological formations for long-term storage.

Hydrogen tax relief tied to local content rules

Decree 13.096/2026 regulates the Low-Carbon Hydrogen Policy, setting rules for the special incentive regime Rehidro and the grant program PHBC. Rehidro suspends PIS/Pasep and Cofins taxes on equipment, machinery, and construction services for hydrogen facilities. However, tax benefits depend on local content thresholds: 15% for electrolyzer components and 60% for transport and distribution equipment.

Industry groups, including the Brazilian Green Hydrogen Industry Association (ABIHV), warned that global electrolyzer manufacturing remains concentrated abroad. Strict domestic sourcing rules could raise plant construction costs or delay project schedules. The decree includes a waiver mechanism if domestic suppliers cannot meet technical or timing demands.

Under PHBC, the federal government set aside R$ 18.3 billion in tax subsidies for allocation between 2030 and 2034. The Ministry of Finance will manage competitive auctions, with the first round scheduled for 2027. The auctions aim to bridge the cost gap between low-carbon hydrogen and fossil-based grey hydrogen. Demand remains a central bottleneck. Major export-oriented projects, such as those planned at the Port of Pecém, face delays as European off-takers slow renewable fuel commitments. At the same time, opposition from the United States stalled proposed international maritime carbon fees at the International Maritime Organization (IMO). As a result, the Brazilian government plans to direct 2027 subsidy auctions toward domestic industrial buyers in steel, fertilizer, and transport.

Regulatory backlog threatens project execution

The success of all three decrees depends heavily on administrative execution by ANP. The agency now oversees licensing, certification, and enforcement for SAF, CCS, and low-carbon hydrogen, while maintaining oversight of oil, natural gas, and conventional biofuels.

ANP faces acute staffing and budget deficits. The agency's statutory staff ceiling is 780 positions, but hundreds remain vacant. The gap has widened as retirements outpace hiring since ANP's last open civil-service exam in 2015. A separate internal workforce-sizing study (Dimensionamento da Força de Trabalho) found the shortfall against ANP's actual operational needs runs even deeper, estimating a deficit of 379 positions. Its inflation-adjusted operating budget has fallen to 18% of 2013 levels, cutting into technical testing facilities and information technology upgrades. Without additional resources, administrative backlogs at ANP could delay storage concessions, hydrogen certifications, and final SAF resolutions.